Directorship

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A director is an appointed or elected member of the board who oversees the affairs of the company. Being a director is a challenging and exciting career which many people aspire or even dream to become. A director is appointed in various ways in terms of section 68 of the Companies Act and he/she can be appointed in terms of the requirements of the Memorandum of Incorporation of the company, or by a board of directors who will vote for him to be elected.

As much as one may dream to be a director this is a position which requires a high degree of responsibility. Section 76 of the Companies Act states that “a director must act in good faith and for a proper purpose in the best interests of the company with the degree of care skill and diligence that may be reasonably expected of a person carrying out such functions…” Directors are given duties which are set out in the Memorandum of Incorporation of the company. A director’s general duty is owed to the company and not the individual shareholders. This meaning the director places the interest of the company first before his own interest or others. When a director has been appointed he should not act outside the scope of the powers which have been delegated to him. He must act within his powers and he must be able to justify actions or decisions he adopts while acting in the interests of the company.

When a director exceeds his powers he may incur personal liability for the performance of the company’s obligations under the contract. He may be relieved from his duties if he cannot justify his actions. The director’s actions may be justified if they are in line with section 76(4) of the Companies Act. His actions are justified in terms of section 76(4) of Companies Act if he shows that he took time to be informed about the matter, looked for other solutions and he believed that the decision he took was in the best interests of the company. A director incurs personal liability if he supplies false information concerning the company, gives false information in the prospectus and if he fails to disclose any personal financial interest he has in a particular matter where the company is involved. A director should not use his position to make a profit or obtain a benefit as this may lead to him being removed from his office.

A person is disqualified from being a director in terms of section 69 of the Companies Act if they are prohibited from being a director by a public regulation. A person is disqualified from being a director when they are an unrehabilitated insolvent, have been prohibited by a court order, have been removed from an office of trust on the grounds of misconduct involving dishonesty and they have been convicted of a crime.

A director is removed from office when they die, resign or become incapacitated such that they are not able to perform their duties. They are also removed when the term of office expires as stated in the Memorandum of Incorporation and when they are declared a delinquent.

Noma Dube

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